37 yrs. old. On Social Security Disability. How much do I need to save each month?

[nhalvorson77]

I am 37 years old and just recently on social security disability. My main question is how much do i need to save each month to prepare for retirement, even though, with the soc. sec. income, i will have a guaranteed check each month. Currently, the soc. sec. is $1,137.00. i am able to manage a light workload right now, so my current net monthly income is around $1900.00 including SSDI. My monthly expenses are around $1250.00, so I have approxiamately $650.00 left after expenses.

Previously, I was working, and I had a 403B and some other assets. There was $5,900.00 in the 403B...is it the right move to roll this over to a standard IRA? Or even absorb the taxes on rolling it over to a Roth? I no longer have employer-matching on the 403B. I also have $6,100.00 in a interest-driven savings account as an emergency fund and $7, 900 in a Roth IRA. As a monthly practice, I have tried to keep a $1,500.00 cushion in my checking account.

With the monthly SSDI check that will continue on-going indefinitely, it provides some security. My questions are:

--Do I still need $1,500 of dead money in my checking account at the end of each month?
--Do I still need a $6,100 emergency fund?
--Should I keep the 403B or roll it over? To a standard or Roth IRA?
--How much of the $650.00 i have left after expenses each month do I need to save each month for retirement? Again, I have the certainty of the SSDI check, currently, $1,137 that will carry me into and during retirement years, i hope.

Any advice would be greatly appreciated. Thank you so much. God bless!

[bjl584]

It looks like you posted almost this same question back in September of last year. But, in your original post you made no mention of SSDI. Have you recently began to collect this?

I think that (just like the response to your original post) we need more info. What is your living situation? Own or rent? Any debt? Prospects to get off of disability and back to higher paying employment? Married or single? Kids?

[Petunia 100]

I am 37 years old and just recently on social security disability. My main question is how much do i need to save each month to prepare for retirement, even though, with the soc. sec. income, i will have a guaranteed check each month. Currently, the soc. sec. is $1,137.00. i am able to manage a light workload right now, so my current net monthly income is around $1900.00 including SSDI. My monthly expenses are around $1250.00, so I have approxiamately $650.00 left after expenses.

Previously, I was working, and I had a 403B and some other assets. There was $5,900.00 in the 403B...is it the right move to roll this over to a standard IRA? Or even absorb the taxes on rolling it over to a Roth? I no longer have employer-matching on the 403B. I also have $6,100.00 in a interest-driven savings account as an emergency fund and $7, 900 in a Roth IRA. As a monthly practice, I have tried to keep a $1,500.00 cushion in my checking account.

With the monthly SSDI check that will continue on-going indefinitely, it provides some security. My questions are:

--Do I still need $1,500 of dead money in my checking account at the end of each month?
--Do I still need a $6,100 emergency fund?
--Should I keep the 403B or roll it over? To a standard or Roth IRA?
--How much of the $650.00 i have left after expenses each month do I need to save each month for retirement? Again, I have the certainty of the SSDI check, currently, $1,137 that will carry me into and during retirement years, i hope.

Any advice would be greatly appreciated. Thank you so much. God bless!

I would roll the 403b into an IRA.

At your income level, you aren't paying any federal income tax, probably no state income tax either. You are grossing a bit over 9k per year at your job, the SSDI is not taxable. After your standard deduction and personal exemption, your taxable income is 0.

If you convert the 403b to a Roth, when you add it to your other income, you will owe a bit of tax on the conversion. Personally, I would just roll it into a traditional and leave it alone. Down the road when you withdraw it, if your situation has not changed, you aren't going to owe any tax anyway. (You won't be working anymore). If you want to convert it to a Roth anyway, then do it a bit at a time. Wait until December, see how much room is left in your 0% tax bracket, and convert just that amount. Convert a bit each year until it has all been converted tax-free.

You are living quite frugally. I think you could share some tips with us.

I think it makes sense to use your $650 per month to max your Roth and then fund your savings account. You never know what you might need in the future (replace a car, replace your mattress, etc.). It is good to have plenty of cash available to cover whatever need arises. If you get far enough ahead of the game, you might even spend a bit on wants.

How is your retirement money invested? One way to make those retirement dollars go as far as possible is to have a sensible asset allocation plan, and keep your investing costs low. If you are paying 1% per year (more or less the industry average), every 10k invested costs you $100 each and every year. If you get those costs down to .17% (like you could do simply by choosing a Vanguard Target Retirement Fund), the same 10k will cost you $17 per year. That difference compounds over time.

[Gailete]

Just to be clear, SSDI is taxable depending on the rest of your income including, I believe, interest and dividends. I know a third of my benefits were taxed in 2013 so it depends.

Are you are the point that you are on Medicare yet? If not, when the MC becomes active, 2 years after the beginning of SSDI, you will be losing about $100/month on that, plus you really need a supplemental policy (MC-C) and a prescription drug (MC-D) program. It sounds like your assets are too high to qualify for Medicaid to help with those. I know currently I'm paying almost $290 for my MC-C policy and my MC-D program and then add in the around the $100 for Medicare itself, that can be almost $400 out of your income each month. If you have medical problems enough that you are on SSDI then you don't want to forgo those supplemental policies as one hospitalization can wipe out all your assets if you don't own those extra policies. Also if you don't sign up for things like MC-D when you are first eligible then when you do you will be paying much more, AND for the rest of your life when you do sign up.

Anyhow I was surprised to see the title of the post as I try desperately to try to save something each month but it is a stretch all the time to put something, anything away and I don't think I am alone in this for people on SSDI. You are apparently in a unique situation, but be sure you are looking ahead and not getting stuck so that you can't afford what you need to have. $1900 a month isn't a whole lot to live on.

And yes you still need an emergency fund for when your car gets totaled, or you have all your appliances break down in the same week, or for whatever reason you need evacuated from your home for whatever reason it would be nice to know that you have some cash tucked away. One of my customers who was disabled had to be evacuated due to Sandy and she lost everything in the flood. Even replacing basics is expensive. Emergencies are those things you can't anticipate.

[Gailete]

Also, if the amount you are getting currently, I think you mentioned $1137 is from SSDI then most years you will get a small cost of living adjustment, which in reality has nothing to do with the actually rise in the cost of living, but your check most years will go up, but some years it doesn't. I think at one point we went three years before a COLA.

Sounds like you just come on line and post and don't bother coming back to read. I posted this info more for the sake of anyone else just getting on SSDI so they would be aware of possible changes in the amount of their check.

[Petunia 100]

Just to be clear, SSDI is taxable depending on the rest of your income including, I believe, interest and dividends. I know a third of my benefits were taxed in 2013 so it depends.

Yes, you are right. I should have said "At your income level, the SSDI is not taxable".

For a single person, if 1/2 SSDI + all other income is less than 25k, it is not taxable. OP is well below that threshold.

[Gailete]

For a single person, if 1/2 SSDI + all other income is less than 25k, it is not taxable. OP is well below that threshold.

Well I'm married and hubby is self-employed so our income fluctuates greatly and some years it is taxed and others it isn't, so we never know for sure until tax time. Through the magic of computers, I was able to just check our last three years taxes. Two years my SS wasn't taxed at all and last year a third of it was. So depending on the other income, things can change significantly.

The OP must be living quite frugally since what they have 'spare' each month is the amount of our mortgage. I still try to put what I can each month into a Roth IRA because, especially as you get older, you may not be able to bring in extra income and with the small COLA you get, the actual cost of living may just gallop way ahead of you. Taking account of your age, you may have to squeeze 50 years out of living with this amount. I also assume anyone that goes on SSDI" has medical problems and so much extra expense will be going towards the doctors and meds. Knowing that Medicare and the supplements takes out almost $400 of my SS, I'm not sure how you are going to have that much to put aside. Your income is so small that unless protected my MC supplements, one hospitalization would bury you financially. But since you have wait two years to be eligible for MC, you may not have seen and budgeted for that scenario yet.

Personally I would tuck away as much as you can each month and don't think you won't need your emergency fund. Also I don't know your situation and why you are on SS, but they do double check with you and your doctor at times whether or not you still need to be on SSDI. If they decide you aren't, then that check disappears. There is no guarantee of a SSDI check for the rest of your life especially if you start getting them at 37. That is close to 30 years pre retirement. They will be checking up on you.